Let the Sun Set on Debt Trap Loans

In 2008, more than 1.2 million Arizona voters said no, by a 2-to-1 margin, to triple-digit interest rates and special exemptions from the state’s usury laws for payday lenders by rejecting Proposition 200, which would have permanently legalized 300% APR payday loans in Arizona. Since then, through bi-partisan efforts, the legislature and Arizonans have rejected several new attempts by lenders seeking carve-outs from the state’s consumer loan laws.

A recent news story conveys the urgency of why more work is needed to enforce and uphold the voters’ mandate. The report showed that many title loans may simply be payday loans in disguise, only possibly worse since borrowers may be putting their car at risk.

While voters were smart enough five years ago to reject the Prop 200 ballot initiative, payday lenders obviously will try to do and say anything to hide their high-cost, predatory product.

Today, they’re simply hiding in the shadows of one predatory loan scheme – car title lenders – to continue their same old dollar-stripping ways. Regardless of the name they use, it’s clear that it’s just more of same: triple-digit interest rates, putting checking accounts and cars of the most financially vulnerable at great risk and leading to a long-term cycle of repeat debt.

These types of loans ultimately push families into financial situations much worse than when they began – particularly in rural communities – with consequences including bankruptcy, delinquency on other bills, and ultimately bank account closures.

The Arizona Community Action Association, which provides services and programs to assist the vulnerable Arizonans and working poor stabilize their financial lives and move out of and away from poverty, works diligently to protect thousands of Arizona citizens from falling into title-loan type traps from which they may never escape. These so-called lenders, many from out of state, must comply with laws protecting consumers from outrageous interest rates and predatory practices.

More than 80% of the readers responding to the recent article in The Arizona Republic were quick and to the point, characterizing car title lenders as “piranhas.” This underscores the very clear public sentiment of the overwhelming majority of Arizona voters who demanded that the sun set on these types of predatory loans.

We appreciate the work of the legislature in preventing payday or other high-cost lenders from rolling back the voters’ mandate. However, the abuses and tactics exposed by The Republic dramatically emphasize that targeted efforts must continue to ensure the voters’ mandate is both enforced and fully realized to end triple-digit interest rate debt trap loans.

Our community deserves nothing less.

Cynthia Zwick is the Executive Director of the Arizona Community Action Association.

Let the Sun Set on Debt Trap Loans was last modified: April 18th, 2013 by AZ Big Media